After the pandemic lows in 2020, the capital markets have witnessed a surge in retail investor participation over the past 5 years. Between 2020 and 2024, the number of demat account holders has skyrocketed to 14 crore from 4 crore, as a combination of low interest rates, an increase in financial literacy and the Fear of Missing Out (FOMO) phenomenon drove many to invest in securities.
The Indian stock market has also grown by leaps and bounds, with India leapfrogging Hong Kong to become the world’s fourth-largest stock market, with a valuation of approximately USD 5.2 trillion, after overtaking France for fifth place in 2023
The Covid lockdown saw the beginning of a surge in retail investment participation, encouraged by increased financial literacy through social media influencers and the relative ease in opening a demat account.
Even though many policymakers are concerned about Millennials’ erratic spending behaviour, the metoric rise in stock market valuations have encouraged many to invest in securities. An abundance of information about meteoric stock price rises has driven many to buy low-priced small and midcap stocks, sometimes risking their entire life savings.
Many financial experts are concerned about this surge in interest in stocks, particularly as India’s stock market is heavily reliant on consumer demand. Banker Uday Kotak has warned that India is ‘over financialised’ for its level of development, and Indian investors from Kanpur to Coimbatore are buying stocks without understanding how valuations work.
With high Real Estate prices discouraging first-time investors, many are turning to the stock market, hoping to get rich quickly. This has resulted in a surge of ill-informed investment decisions, forcing the government to act on biased investment advice from unqualified stock market influencers. Though many interventions by the SEBI and enforcement agencies have borne fruit, a lot more needs to be done as the surge of complaints are rising from all quarters.
